DRINKS giant Diageo has said demand for its products in Ireland and southern Europe has been affected by the dire economic environment.

The company, which is behind Guinness, Baileys and Smirnoff, posted a 5pc rise in sales on the back of strong demand in the US and emerging markets for sales of its spirits.

The results for the three months up to the end of September came after it emerged that the price of a pint is due to rise by about five cent, hitting products like Guinness.

Diageo has blamed the price hike primarily on the increase in the price of barley, which they claim has increased by about 20pc this year.

Diageo chief executive Paul Walsh said the company had delivered a solid start to the new financial year, with net sales in line with expectations.

"The strength of our brands and our routes to market, coupled with the investments we have made in faster growing markets, continue to drive the performance of our business.

"Growth in North America reflects our strength in US spirits and, while the consumer environment in western Europe remained challenging, we delivered over 30pc net sales growth in the faster growing markets of Europe," he said.

The group, which posted a 9pc rise in sales in the same period last year, said Africa also delivered another double-digit net sales growth.

Net assets were €8.9bn at the end of September, compared with €8.38bn at end of June.